Engage Singapore politics by understanding more about WWE.

With my exams over, my next paper would be sometime in November so I get to enjoy the rest of the summer holidays.

Quite a lot has happened since my last posting. Significant is that some lawyers have been accused of abusing the court process to delay the execution of Kho Jabing. There is also a storm brewing over the use of Singlish in Singapore. I thought I'd share an approach to dealing with these issues before I go back to talk about financial markets and my upcoming WDA talk.

a) The question of whether Singapore should impose the death penalty does not require legal expertise.

First of all, I did spend most of my professional life being intimidated by lawyers (which explains why I am in Law School today). Throughout the debacle, some well-meaning lawyers friends have been sharing the case judgement over social media. While reading the judgment is good, most of the battles over social media revolves around the question of whether the death penalty ought to be imposed.

In such a case, it may be useful to remind ourselves that lawyers do not have an edge over arguments of this nature. The question of crime control as a function of deterrence, retribution or rehabilitation is the realm of the man of the street. You can vote to decide how the government sets the gearing on capital punishment.

For readers of this blog. You need to understand two concepts of positive law and normative law to decide whether you want to get into the wrestling ring with a lawyer, law student or legal expert.

Positive law is the current state state of the law as-is. Lawyers are paid big sums to explain the state of positive law. You consult a lawyer if you want to know what the state of the law is. Normative law, on the other hand, is what the law ought to be. Lawyers have no power over the domain of normative law, academics can take a view but judges can shoot it down. Philosophers have more power over this domain for lawyers and questions on normative law are highly contentious.

When a lawyer or law student argues about the normative law, any man of the street can just say that if you are just extending a moral or economic argument as to what the law should be, not what the law actually is. This falls into the realm of opinion.

b) Question of whether Singapore should promote or eliminate Singlish is a normative argument understood by watching more WWE.

The question is why the Singlish debate is related to argument of death penalty.

In fact the debates on Singlish, Death Penalty, Pink Dot, minimum wages and treatment of migrant labor are all arguments on what Singapore ought to do. At this stage, WWE provides a better understanding of the issues at hand.

Wrestling shows divide wrestlers into two camps, face and heel. Faces and heels normally feud with each other to keep viewers entertained. Rarely do faces battle faces or heels battle heels. When Triple H is a heel, he may feud with the face John Cena or The Rock. He will never form an alliance with another face like Roman Reigns but will gang up with other heels like Randy Orton.

Political discussion in Singapore is also rather predictable. Faces and heels fall into their respective factions and take a very black and white stance to moral issues. If you are pro-Singlish, for some inexplicable reason you will support Pink Dot, a minimum wage, social welfare and will be against the death penalty. If you are anti-Singlish, the opposite stance will be taken.

Like WWE, the feuds also transcend previous arguments and explains the relative bitterness and animosity between the two factions.

While I support plain english more than Singlish because it keeps us connected to global trade, I speak Singlish to connect better with fellow Singaporeans. MPs speak Singlish to connect with voters. So at first, I am puzzled by the disproportionate government response to my friend Gwee Li Sui's Op-Ed on Singlish.

But if you are a wrestling fan and understand the feuds between faces and heels, the response makes perfect sense. Gwee Li Sui's involvement ( and perhaps moral victory) during the Penguin book banning incident may explain this disproportionality.

Similarly, the looming Pink Dot / Wear White event is something akin to Wrestlemania and the government may need to play its hand to show it's support for the majority conservative population in Singapore.

In summary, Singapore politics is akin to WWE, watch more wrestling to understand the tension between western liberals and the conservative majority.

Investors should not be wrestlers.

We should stay by the side to take a position which would bring the best returns to our portfolio.

Of course, to some people, making money is already taking a side in Singapore politics.

Is Grit Overrated ?

Bully the Bear has a great article on finding meaning in suffering. I'd thought I would build on this idea by critically examining its ancestral concept of Grit because grit has become the buzzword of the day.

Grit is the ability to take punishment and roll with the punches. People with grit find ways to persist through hardship and self-help literature claimed that gritty people become more successful in life. Because of very persuasive speakers like Angela Duckworth, grit is slowly creeping into the public narrative and it is certainly expected that the best bloggers do talk about grit or its derivative concepts every now and then.

I want to propose that instead of looking at Grit as one true trait of worldly success and financial well-being, it may be more instructive to view grit as a framework of similar ideas in the past on the qualities which leads to success.

Before World War II, the desirable trait to have was high IQ. People with high IQ are faster at grasping new concepts and IQ tests were developed by the US Army to assess the cognitive strengths of new recruits. Singapore took this one step further by creating the gifted program in the 80s as attempts to find better ways to harness our human capital. Unfortunately, with criticisms of elitism, IQ has fallen out of favor in Singapore. While I'm not really a gifted person, I find it ludicrous that intelligent people are made to constantly apologize to the masses for not being able to fit in. I think they can do better by hanging out with normal guys like me who appreciate their quick mental reflexes.

Which lead us to the popular trait of emotional intelligence or EQ which was bandied about in the 90s after becoming viral all thanks to a speech by Goh Chok Tong on a book by Daniel Goleman. Since that event, I bet no GEP student ever gone through their lives without an idiot yelling "You high IQ, but low EQ." at them without realizing that demonizing scholars is itself an act which hints at the lack of empathy.

And now we have Grit. A single measure of persistence which the magic pill to all our personal inadequacies. If a person has grit, he will overcome all personal obstacles in life. If he fails, well, he's just not gritty enough.

I want to caution against the tunnel vision of viewing one single trait for success.

[ This is the same reason I don't think you can become a billionaire by simply  spouting the pithy wisdom of Jack Ma. Jack Ma is a unique human being. I'm sure he did not build Alibaba because he spent his younger days spouting the wisdom of some older billionaire to other people. ]

The problem with IQ is simply that not all high-IQ people do well in life. Some whose IQ exceed 200 spent their entire lives being misunderstood and being unable to monetise the millions of ideas floating around in their heads. In the book Peak by Anders Ericsson, a study on Go masters in Korea, Japan and China discovered that their mean IQ was actually only 97.

The problem with EQ is even worse. People who are full of empathy and who develop very powerful control over their emotional awareness are found to be more gullible and tend to fall for scams.

There is currently very little literature on the downside of grit. But I can imagine that a very persistent person may pursue an idea so aggressively that he would either go bankrupt over it or spend a large part of his limited lifespan pursuing a dead end business.  As there may be a correlation between grit and conscientiousness, I am guessing that people who are too gritty may even have OCD.

My final argument that we should not be overly obsessed with one trait is based on a study on London cab drivers. Scientists find that those who get a license to drive a London Cab has had significant changes to a certain part of their brains such that they can excel at mental tasks which are similar to that of navigating their cabs. However, some tests done for other mental tasks actually showed that the driver performed worse than average person.

When you try to develop a strength at something, are you doing it at the expense of something else ?

Coming back to the essay Bully the Bear, I agree that framing your suffering as a meaningful task will allow you to overcome more obstacles and lead a more fulfilling life.

But life sometimes throws all sort of problems at you. You might work with complete assholes. Your pay grade may not justify the volume of work that you are given.

Your first question should be : Is this suffering necessary for me to commit so much willpower on this issue?

We're back to facing an investment problem again.

Instead of determining your allocation of financial assets, you should be thinking about allocating your attention and willpower to the problem.

Before you eschew kiasuism...

I was having breakfast with the folks of BigFatPurse and Jon complimented that I would never take the risk of running a business because it's just not something a guy like me would do.

Jon is right.

I would take enough risk to generate the returns I desire but not more than necessary to become financially free. My family's well-being is at stake.

If there is no need to take any more risk, I would prefer to farm my excess funds into the most consistent form of arbitrage that I know of - that of knowledge arbitrage. The cheapest trade-off which has the largest returns is to monetise your knowledge and skill. Knowledge, unlike property, cannot be misappropriated or taken away, so once you have the ability to trade knowledge for wealth, it becomes a fairly consistent means of earning a living.

These day you seldom get really philosophical arguments in Parliament because the government, by and large, works, which is why we need Nominated Members of Parliament in Singapore. NMPs do not need the support of the people and can spout as much irrational nonsense as they want so long as it fulfils the agenda of the tiny minority of people they represent.

NMP Kuik Shiao-Yin has recently sparked a debate on whether Singapore should kill its Kiasu culture.

I have not determined whether on the whole I agree with Kiasu culture but I can say that I am quite exposed to it right now being part of this neurotic system of legal education in SMU.

Kiasuism explains why law students work so hard. But kiasuism without an understanding of the effort and risk it entails can be tiring, stressful and even result in the loss of precious lives.

Right now, I can imagine my batch of classmates graduating into one of the worse markets for legal practitioners in recent memory. My guess, backed by some credible folks in the industry, is that half of them would not be given permanent jobs after their pupillage. The bar exams are also getting harder and there has been talk that standards for Parts An and B have been tightened recently.

A problem is that we did not delve into definition of what a truly Kiasu person would do.

To deal with new economic realities, some of my classmates are pushing themselves harder to game the system.

Just today, I learnt of a brilliant new strategy of applying for a leave of absence citing some personal reasons immediately after a bad exam episode to game the system. The problem with this strategy is diminishing returns if more people execute this stunt. If too many people do this, HR departments would catch onto this.

Or instead a Kiasu person would activate Plan B or look for a Blue Ocean industry elsewhere. This person can do more networking and look into alternative industries which pay better. Another valid way to play the game which requires some hard work and lateral thinking.

The problem is that we don't know whether a Kiasu person would do the former or the latter, and we are now trying to shoot it down in Parliament almost like it's an STD which all Singaporeans have.

I think the most disingenuous application of NMP Kuik's argument is that it is always applied in a school setting. This argument is always about the unhappiness of our children.

I'm going to offer a politically incorrect version of what actually happens when we are Kiasu.

If you are Kiasu and the people around you are not, you are very likely going to be happy at the expense of others. It worked for me during my first semester, I got $4,000 pre-reading my textbooks and giving myself  a 6 month head-start in law school. I was a happy sociopath at the expense of my classmates. But what else is new ? If you have two streams of income when your peers and some bosses have one, you are one happy SOB. Wealth is relative.

Now I have just completed Semester 4. The game has changed.

In school, if everybody is Kiasu, then everybody is unhappy. Eventually a person's lack of talent shows over the long run. My subsequent grades became average once everyone started to pick up on how to excel in class. I end up working harder and getting shittier grades. Now everyone is miserable and angry.

My concern is that NMP Kuik is harbouring a special fantasy of every Singaporean where everybody's foot is off the pedal. Then just pushing yourself a little bit will yield great results. People who harbour such fantasies are no better than guys like me who openly admit to being the class of super-Kiasu rent-seeking aspiring-super-managers of the new economy.

A person who wants a life in Arts, Music or Literature is free to pursue this life path. But they want to take offence because somebody else is into Law, Engineering, Accounting or Medicine.

Which is why I argued that a start-up founder takes an irrational position when he starts a business. If he fails, he will have a problem getting a spouse who prefers a government service engineer. But is it fair to then accuse everybody of being so kiasu and wanting to become a $4,000 civil service engineer ?

NMP Kuik is trying to boil the ocean.

If some Singaporeans ever decide to believe her and become artists, poets, sportsmen or social workers, I bet my last dollar that the other proportion of Singaporeans will exploit the wider gap left open to people who desire the more profitable professions the economy has to offer.

So, in short, if you want your kids to be happy, let them play. It's your right to do so.

But don't cry to the government when you discover that other guys are not only not letting their kids play but sending them to cram schools because they want their kids to be your kid's supervisor in the future workplace.

Discussion on my China Merchants Pacific Holdings Maneuver...

This year, I have been making great judgment calls with other people's money but not my own.

The markets have been very bitter-sweet of late with offers being made to take a staple yield counter China Merchant Pacific Holdings private at $1.02 per share.

Unfortunately, I did not own this share in my private portfolio as I am still struggling to sock away savings without an earned income as of late in the face of multiple personal emergencies. I had initially wanted to get into China Merchants in a serious sort of way at the end of May when the bulk of my dividends arrive. This was sadly not to be.

In the end I was lucky that I have noticed that this stock has become very attractive as of late and as a follow-up to my Saizen REIT maneuver I shared a couple of months ago on this blog, I actually told my dad to farm almost all his proceeds from the sale of Saizen into the China Merchants counter because it was a great way to get consistent 7-8% yields at around 81cts then.

That maneuver really paid off today an we exited 80,000 shares today at around  $1.01.The pay-off has been significant in the face of the May sell-off because we can start farming it into other yield counters which are on the cheap which I have been monitoring of late.

To be fair, luck played a bigger role than skill. Ascendas Hospitality Trust was also rumoured to be about to be taken private as well when I sold the Saizen shares and if I had advised my dad to farm the money into that counter instead, we would be sitting on losses instead of gains. I  ultimately chose China Merchants because it was an equity counter instead of a REIT and thought that tolls would not be negatively impacted by the Chinese down-turn.

As usual, we do not have a habit of enjoying our capital gains, so over the next few weeks, we will be farming the capital back into SGX but I am no longer looking at buying just one counter.

Instead I am looking several equity and REIT counters rather than that one counter which I have so much conviction for.

One should not get cocky and start believing that he can get third time lucky.

Nevertheless, it is sad that SGX has lost a stalwart dividend counter which may never be replaced.

Smart Beta - Learn about a future investment strategy today.

Singapore investors are are very much behind the curve when it comes to better investment products in the market. The aim of this article is to look at this very modern buzzword called Smart Beta and start everyone thinking about how to react when this this new trend arrives in Singapore.

Smart Beta is the next evolution of the ETF. It employs a formula or algorithm to determine the composition of a portfolio and transfer cost savings to the investor.

What Smart Beta tries to achieve is to create a new range of offerings which simulate how a fund manager would manage your money. Fund managers typically invest and diversify your stocks the same way as his benchmark index would be designed, buying a basket of stocks similar to an ETF but then he would vary the composition of his stocks by exploiting well known market anomalies. One example is that by simply holding an equal weighted basket of stocks, the fund manager can perform slightly better than capital-weighted index.

[ This is very similar to an old idea called fundamental indexation. Perhaps a practitioner can advise me on what's the difference between that and Smart Beta. ]

Six strategies have since been packaged in the form low cost ETFs :

a) Liquidity - ETFs which give more weight to liquid stocks.
b) Momentum - ETFs which give more weight to stocks which previously did better.
c) Quality - ETFs which give more weight to more profitable companies such as ROA and accruals.
d) Size - ETFs which exploit the idea that smaller stocks tend to do better in the markets.
e) Value - An ETF which overweighs higher yielding stocks fall into this category.
f) Volatility - An ETF which gives more weight to stocks of lower volatility.

As of now, there are no Smart Beta ETFs in the local stock exchange but understanding this new instrument is useful to us in many ways.

As Smart Beta ETFs fall into 6 strategies, we can reverse engineer each strategy to find out what most fund managers think. Imagine how vulnerable fund managers are one an ETF can be designed to put them out of a job. Within a year or two there might even be ETFs which hold a basket of Smart Beta ETFs which feed economic data into an AI which determines the ETF allocation.

The question I want to ask myself and readers is whether would it be possible to design a around Smart Beta, mapping an allocation to economic situation of a country.

Eg. When the economy turns around after a recession, you should over-weigh Momentum. When a market has peaked, you over-weigh Value.

This exercise should be done now because the rise of Smart Beta is inevitable in Singapore.

Just like an ETF for S-REITS.

Planning a talk on funding a child's education.

I'm currently working with WDA to give a talk at the Lifelong Education centre on 14th July 12.30pm.

Right now the details are still quite sketchy, but I thought that blog readers should be able to pitch in and suggest what they want to hear.

The working title is "Finding your child's university education".


Here's what I have so far.

• Paying for Education is about increasing a child's human capital as opposed to financial capital. It should be treated like an investment.
• Why is it naive to see a university experience purely from the viewpoint of a love for learning. 
• University qualifications have two effects of signalling and skilling. Signalling remains the more important concern in a highly competitive meritocratic society.
• The result of investment in human capital should result in employment and higher wages.
• Comparisons will be made between local and private universities.
• A very brutal assessment of private universities will take place using the theories explained to the audience.
• Details on CPF loans.
• Details on Education loans.
• Details on private loans
• Where to get information on scholarships.
• Investing to fund the education.

I also expect very lively debate in this talk because I don't intend to pull any punches about how gritty our education system is. 

Do share with me what you would like to hear in such a talk. 

Cherish the slackers in your life !

Yesterday, my network of law students and lawyer friends are spreading news about the suicide of a legal trainee who was recently not retained by a reputable law firm and dumped by his girlfriend. Beyond this piece of news, I am unable to verify the information further because if it were true, it should have been all over the mainstream media by now.

One question I ask myself about my law school experience in SMU is that why is it so different from my time in NUS Engineering and Business school.

In Engineering school, we were generally left alone to pursue our own interests, the biggest problem is that there is too little drama so most of us have little to talk about beyond circuit diagrams and equations. To seek trouble I did public speaking and hung out with the bohemians from the other faculties.  In Finance school, there was no academic pressure because we all worshipped money. Grade were secondary to passing the levels of the CFA.

Law school is a new beast. The experience is overwhelmingly negative and I think we cope by becoming sociopaths. Group work has plenty of politics and, without providing details, some people I know do stupid things which may affect their reputation after they leave.

There is too much drama in Law School and I want to propose a reason for this.

There are insufficient slackers in Law School ! The folks who drink and party from Law School are not real slackers. They are well read in their cases and can argue even in a drunken state.

In Engineering and Business school in the 90s, there will always be a bunch of students who do not prioritise Engineering in their lives. Often they might spend a lot of time on CCAs. Others party and drink. Slackers, if anything, are probably more intelligent than the hard workers like me during my undergraduate days. It's not easy to get into University by slacking off when only 15% of the population could get into NUS in those days. So I believe that slackers just have other priorities in life.

In the modern University, slackers matter a lot.

For the folks who put in decent effort in school, we occasionally get bad grades but because of the existence of slackers, we don't really fall very far down the curve. A friend even claimed that his academic achievements were not by virtue of his brilliance, but by the fact that his peers were so bad.

The situation changes in a place like Law School. There is no room for error. Put in 99% of effort as opposed to 100% of everything you have, you may slip from 75% percentile to the 40% percentile because everyone has already figured out how to do well.

This is not a healthy environment.

People become neurotic and anxious. In SMU, there are rumours that  some students conceal red-spot textbooks in the libraries.

Perhaps the anxiety is the reason why the trainee just decided to off himself. From his perspective, his world has ended. There are so many folks who can't even get into a local University. Some can't even get into a Secondary school. Being a parent myself, I am very sad for his parents.

While I have yet to get a training contract, I will avoid that rumoured law firm. Once a life is at stake, I cannot but wonder as to the kind of corporate culture which can lead to this tragedy.

For the folks who are in University like me but in other faculties, I hope that you would cherish the slackers amongst you. Don't write them off. They are probably just as smart and capable as you are but subscribe to a different life philosophy than you do.

Without them, your lives are going to be a lot more dramatic with no room for error.

This can warp your perspective.

And it can cost you your life.

We are better off being a Transactional Society !

This week is a good week.

Some dividends showed up in my bank account and it was running dry after I overspent during the 5 days between my last exam paper and the start of summer term. I set aside all my family expenses during the early parts of a three month dividend cycle. What remains in my bank account is a bare minimum I have to pay for my personal entertainment, food and transport.

I have spent over 30 months without a pay check and managed to do this without touching my capital and living entirely on dividend pay-checks. My family has no earned income. In the process, I have also paid 30 months of my mortgages and my entire school fees.

No other society can make it so easy for someone to able this with only 15 years of working life in IT.

But I'm also not a romantic about our society.

The low income and non-existent dividend taxes I needed to build up my portfolio is almost unique to Singapore. The price we pay is that there is no welfare. Every negative externality like cars and alcohol are taxed aggressively. The primary stance towards a person who is seeking help is for them to engage in self-help. Compared to Socialist Europe and all those countries Singaporeans flee to, we can be harsh indeed.

It becomes disturbing that there are now calls for Singapore to become less transactional, to be less kiasu, and to be less optimised with our policies thinking that it would make our society better.

What do 'Social Democrats' and liberal brownshirts want to achieve when what they truly desire is to tax everyone to pay off a smaller proportion of the population which might consist of some needy fellow citizens, but would in reality consist of mostly citizens who are trying to game the system.

If they succeed, I expect the investment community to be the first to suffer.

Liberals in attempting to get rid of the "no free lunch" approach in Singapore will, in the process, eliminate the "cheap lunches" we've had for the past 50 years.

Let me illustrate with an example of unemployment insurance, a hot by-election topic which, ironically,  would have benefitted me greatly when I transitioned into law school.

We can actually create a very rough estimate of the cost of unemployment insurance to the tax-payer. Suppose there are about 3.5m citizens drawing $3770 as median income. Suppose this policy will increase the number of folks leaving work to about 5% of our population every year. If each instance of unemployment will result in a total pay-off of about 6 months of salary in total, the price tag to the tax-payer will be close to $4b, about half of our personal income tax collections in 2014. And this does not include the cost of hiring social workers to administer this payment.

The income tax of everyone working here must increase by 50% to cover the price tag of this unemployment insurance !

Now suppose you create this insurance yourself as a median income salaried worker, all you need to do is to save about $23,000. If you can save $500 of your earned income every month,  4 years of work will secure a contingency plan for your unemployment, not to mention a small investment income stream if you were to keep working.

Of course, my solution cannot cover the weakest members of our society. I wrote this article to illustrate to everyone is that there is a communal solution or an individual solution to every problem.

I've done my small part and have overclocked my community service hours in 2015 to help one disadvantaged family by giving math tuition to their two kids. It remains my most cherished memory in SMU. I see more pro bono hours ahead when I return to the workforce in 2017.

I propose that liberals do the same so that they can assist and gain exposure to the weakest members of our society using their own personal time and resources instead of harping on why Singapore is such a cold, transactional society.

Why IT engineers are similar to cleaners in Singapore ?

Do not let the title distract you from the central message which I will bring to you today - There is no better time for a A level graduate to go for an engineering degree with the recent reforms announced by the government.

Before I get to that, I will first answer the question as to why IT engineers and cleaners have quite a bit in common. If you read the article in Labourbeat by MP Zainal Sapari, one of the key reasons cleaners did not enjoy an increment for a decade was due to outsourcing. Outsourcing was then led by the government which made the decision to hire cleaning services from private sector providers. This cut-throat competition forced these private sector providers to make "suicide bids", bids which forced unskilled and uneducated workers to take on work at a lower price. This was the primary reason why cleaners enjoyed a lower standard of living over the years.

At least IT Engineers were in a similar situation for the past decade. Outsourcing and a liberal foreign talent policy basically meant that engineering work could be done at lower and lower prices. Outsourcing MNCs eventually tried to sell their services also at cut-throat prices but if you really examine the kind of labour they deploy in IT departments of most of their customers, it was mainly staffed by engineers with the barest qualifications. An NCC diploma can be assigned a senior systems engineering role and then deployed to support a statutory board. If you fire him a decade ago for his attitude problem, he resurfaces under another statutory board with another MNC because no one wants to do tech support. The net effect is that engineers don't get no respect because we are support staff and people who meet us just spit on us when systems are down.

But engineers are not unskilled labor. We can fight back. We just reinvent ourselves as bankers and investors. During the boom town years in banking, a Masters in Engineering can easily stop doing engineering work and get a starting pay at $5,000 in a bank.

Singapore is now facing the consequences of this mistreatment of technical talent. Trains are breaking down and startups cannot find the skilled programming workforce to create the apps which can change the world. Worse, the oil and finance sectors are not doing too well these days.

Which brings us to the new policy of paying engineering talent $4,000 a month for fresh graduates.

I think this is a powerful game changer for the whole industry. Given that our GDP growth is struggling to reach 2% a year going forward, a 20% increase in engineering salaries can be seen as 10 years of progress. Kudos to the government for doing something significant for a change to preserve technical talent in Singapore !

A  promising engineering student now has a $4,000 baseline to look forward to upon graduation. SMEs who cannot pay top dollar for engineers now has to work with the polytechnics to provide apprenticeships to build a talent pool for themselves. The Silicon Valley startups are unaffected because engineers cost about $120,000/yr in the US and Singapore remains fairly competitive in this arena.

Now is the perfect time to do engineering and computer science.

But here's some more advice :

a) Time to beat the Budget Babe ! Better save at least $30,000 a year from your excess income.

My friend Budget Babe became viral because she claims to save $20,000 a year. A fresh engineering graduate with a $3,600 take home pay with a 1-2 month bonus should target a $30,000 savings in his first year of work. The great thing about engineering as a career is that its unpretentious and your career progress will not be impeded if you do not dress well or spend lavishly. Just carry on living like a final year university student.

b) Your second degree can be something that does not depreciate so quickly.

Moving forward, I actually think that engineers have a bright future for at least a decade. But with $30,000 savings a year, it only takes 2-3 years to save enough to consider an advanced degree like the MBA, MPA or JD which provide alternative career paths. But that's only if engineering stops being fun by then.

Even better, you can continue with the CPA or CFA without really quitting your day job.

Domain skills can be used to complement your technical skills. The difference is that now you can actually afford it at a younger age.

c) In the worse case, you can just treat your engineering career as bonded slavery for 10 years by learning how to invest well.

I won't go as far to say that engineering work is slavery but some of you might be unfortunate enough to be doing government procurement. In that case, saving $30,000 for ten years can still net you a portfolio of at least $300,000. This will produce $2,000 a month at 8%.

You can then look at different options later. If you remain single at age 35, there are many career options available to you in the private sector or other countries. Good news is that under this government guarantee, you can limit your bondage to 10 years which is great compared to engineers in my generation !

But I think a true technical professional should just say no to a career in government procurement. Trust me on this one !!!

d) You are still likely to be "betrayed" within 15 years.

Betrayal is a very strong word but when that happens, I doubt Singaporeans will become angry with the government for systematically eliminating your technical jobs when you reach your 40s. Both oil and gas, law and finance had its heyday with smart guys getting high salaries by joining these sectors. If anything our government is likely to be overly compassionate compared to the private sector.

No career path will survive prosperity for too long.

Establishing Singapore as a Smart City will take about 10-15 years of effort and engineers will experience rising standards of living compared to other professions. As in the past, the cost structure to sustain this hierarchy of technical talent will become too high and when you reach 40-something years old, the young 20-somethings then will want to know why you are so special and why are you put in this pedestal. You will become a burden to the tax-payer who will consider you a "jiak liao bee".

This is the ultimate advice, if you want to see how society will treat you when you hit your 40s. Just look at how society treats the 40 year olds now. But hopefully, you would have done something to reinvent yourself before the government reinvents Singapore decades down the road.

In summary, while my generation of engineers would probably not be able to benefit from this development, Millenials now have a pretty solid reason to study engineering or computer science. Imagine a career where you get to play with all sorts of toys, hang out with other geeks, dress badly, and still take home $3,600 a month on your first year. If the work does not suit you, the higher starting salaries effective nets you an option for a career change within 3 years.

I can see definitely see the smart geeks moving back from Law and Medicine now.

See, this is an optimistic post !

Introducing BigScribe and the Crowdfunding e-book.

As a single personal finance author and blogger, my capabilities are limited.

However, as a coalition of financial bloggers in Singapore, our potential is limitless.

A few of us financial bloggers have pooled our expertise, effort, and a small amount of capital together to form BigScribe Pte Ltd. The aim is to create products of higher quality for the Singapore investing public and find modest means of revenue through advertising.

Our next product is on crowdfunding which has taken the financial world by storm. Through crowdfunding platforms, regular investors can invest small amounts of money money to SMEs which can have very attractive returns of up to 30%p.a.

But there is no free lunch in Singapore.

Local banks may avoid providing loans to risky small businesses for valid reasons. To ensure that investors do not get burnt too badly from a default event, we've prepared a guide on how to participate in this financial revolution.

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Exams are over ! Quick update !

Just a quick update.

a) Exams are over

I am glad that my most intense semester is over. It should be smooth sailing towards my graduation in 2017.

b) Secured 6 weeks worth of internships

I was actually  interviewing with law firms while preparing for the exams, while there still some anxiety as I have yet to obtain a Training Contract, at least I can say that I have met my graduation requirements. I will be spending the next few days hunting for work after graduation.

c) Financial markets recovery is still intact

While I am less optimistic about the Singapore economy, the markets are doing ok. Will have a more detailed update in a few days time.

d) Readings

It might be mind boggling to some but I actually finished reading the Path. This is a page turner and I finished it in two days while preparing for my Equity and Trust exams. This is a fascinating exploration of Chinese philosophy which has become the third most popular course in the Harvard campus.

The authors took a lot of pain to distill Chinese philosophy into its essence and made it relevant for millenials and knowledge workers. Of course, to make it happen, certain aspects of Confucianism and Taoism would be ignored.

I wish I could explain personal finance that well.

e) Recreation

The problem with me is that summer term starts next week and I will be back having nine hour lectures a week. This makes recreation a serious priority until Sunday.

I can't play a very intense game like XCOM 2 until next week and will probably be installing Mortal Kombat X into my PC for some fun. I would also be completing Gundam Iron Blooded orphans over the weekend.

I will be talking about the reforms to Engineering salaries in my next post...

Today is my daughter's birthday and I should focus on celebrations instead.

Personal update and short break from blogging.

Here's a personal update from me just before I begin exam preparations.

a) Financial markets

I think my financial situation is much better than a couple of months ago. Markets have recovered a bit, but may dip downwards over the short term. The end of March would see a round of dividends coming in which would be applied to my next three months of living expenses, with all the medical emergencies behind me, I should be able to park some money back into the markets.

But the better news for folks with home mortgages is that SIBOR is flat. My belief is that the Fed would not raise interest rates as much as what the pundits would like. China remains the biggest risk for investors.

Of interesting note is that the financial media is starting to talk about this thing called Smart Beta ETFs which have yet to appear on the local scene, maybe I will get to talk about it in further detail after my exams.

Another piece of good news is that Singapore just launched two equity crowdfunding portals. Unfortunately, I do not qualify as an accredited investor yet so perhaps one reason to get back to the workforce would be to work towards that second million in investment assets.  My position is that its high time regulators stop protecting retail investors and allow perhaps us to invest $50,000 into an equity crowdfunding platform - some investing is emotional and aspirational and some folks just wanna own a tiny slice of an aquarium. ( Even I wanna own a game-shop one day but don't want to hang out with smelly Magic Players. )

I do hope to do one more research paper on this topic.

b) Law School 

I was very lucky to clinched one internship for the holidays so I was at least able to fend off some anxiety over graduation requirements but my studies this semester is a huge mess as the subjects I've taken are perhaps one of the hardest in the JD program (Equity and Trusts is giving me a headache).

So I started preparing for examinations early and have been spending some time mugging in the library. This is perhaps the lowest point of my JD experience with nothing working out for me so far.

If I survive this episode, things will start looking up for me.

c) Books

Beyond the usual periodicals like The Economist, I am stuck in the middle of Humans are Underrated by Geoff Colvin. So far, I am not really convinced that it has any useful insights. Books have been talking about creativity, empathy and design for decades but sky rocketing salaries are still reserved for software engineers in the US and the hardcore professions elsewhere. At best, books of this genre can convince me that all professionals would need to develop soft skills to thrive.

But then why are 40-50 year olds with experience and soft-skills driving Uber taxis instead of keeping their jobs in the corporate world?

d) Hobbies

I just watched Batman v Superman and almost wanted to put in a full posting about taste. Critics panned the movie, but many of my friends found it entertaining. There were some unnecessary slo-mo scenes but overall I had a good time and the movie did not seem boring at all. I really look forward to the Justice League movie now.

Growing Your Tree of Prosperity remains my best-selling and most embarrassing product on this blog. It was not edited because I let the publisher convince me that it was not necessary and some money could be saved. Some folks slammed my poor grammar ten years ago. But book sales remain high and more importantly, folks are accumulating $100,000 on the advice from the book. My other works never made the best-seller lists despite solid editing and more sophisticated advice. Maybe the poor grammar allowed me to click with fellow Singaporeans.

Perhaps I am not a beautiful "English Literature person" who insist that every movie must be a rarefied experience with a fabulous plot ( I am the kind of guy who enjoyed The Mermaid and White Chicks ). I carefully cultivate my indifference to good taste in wine, movies or fiction because when you juggle law, an investment portfolio and keeping up with technology, you need to enjoy any crap that is being shown in the cinemas with the limited time you have.

Of course, "numerical people" often have to endure being labelled with bad taste by people who are more sensitive to aesthetics.

This is not the fight we should be striving to win.

Perhaps in between mugging sessions I can catch the Brothers Grimsby.

Catch you guys in about 3-4 weeks when the exams are over.

How to think about a basic income in Singapore.

Some societies are starting to think about implementing a basic income. A basic income is a form of unconditional welfare that gives everyone a basic salary to live regardless of whether he has a job or not.

This idea is attractive to both sides of the political spectrum. The left obviously want some more ways to narrow the rich-poor gap. The political right thinks that it is a form of welfare which does not require a lot of social workers so it keeps the government lean and mean - everyone gets a small wage so long as he is alive and kicking.

Singaporeans are probably not at the stage to consider a full basic income because it would rob Singaporeans of the will to go out and do some solid work for the country. But done at a very small scale, a fixed amount of funds going into every citizen's spending account every month may possibly incentivise someone to take bigger entrepreneurial risks. It also provides home-makers a small allowance. It would certainly benefit the folks in my age bracket who is facing structural unemployment.

Suppose we start at a very reasonable $100 a week or $400 a month for all citizens. There are 3.27M Singapore citizens here, so the price tag will be $15.7B a year. To put a perspective on how much that is, the value is twice that of the Pioneer Generation Package. For the entire FY2014, personal taxes collected is equal to only $8.9b with GST collections being about $10.2b ( From here ). As part of this mental exercise, everyone must be willing to double their income taxes and GST to put $400 into every citizen's pocket every month. Of course, in this exercise I did not cover changes to corporate taxes because the whole point is to get Singaporeans to become more entrepreneurial.

This arithmetic exercise can result in different conclusions. Some readers will interpret this as the Singapore government being able to afford a $400 basic income - just increase personal, GST and corporate taxes. Others will argue that it's not worth levying so much taxes on the middle class so that everyone can get a pittance every month, it is more effective to use the money to improve the transport or education system which has a better impact on citizens.

Of course, you can roll your own basic income. To generate $4,800 of income a year, you would just need $60,000 invested at 8% yields or $70,000 at slightly less than 7%.

But perhaps subtle change will allow all Singaporeans to attain this without levying a cost on tax-payers.

There is still no such thing as a SG-REIT ETF. It's such a simple idea that I'm sure some folks have thought about doing this.

If SGX can approve a simple product which is a fund consisting of equal-weighted REITs listed in the Singapore stock exchange, everyone will have access to a highly diversified real-estate portfolio which currently yields 7.3%. Singaporeans don't have to be very sophisticated to get their basic income of $400, they just need to accumulate $70,000 and have an account with a local broker.

But I can imagine why this would be a nightmare scenario for professional fund managers.

Harshness against unemployed manager is unwarranted.

The Year of the Monkey continues to bring a hodge podge of surprises to me. Markets are apparently up.

But this article should have been up two days ago as it has been a fairly demoralising week. I botched a group presentation and I spent most of my time looking for an internship to no avail.

Which is why amidst the rejections I am getting, I am quite sympathetic to Mr. Chua GC as featured in the Straits Times but was sadly subject to some brickbats from some corners of social media.

a) Mr Chua is not addicted to an expensive lifestyle.

Some parts of social media accuse Mr Chua of being unable to downgrade his lifestyle. I beg to differ. While his family was quite high earning in the past, hitting about $14,000 a month, he currently lives on his wife's income and can even save $1,000 for his family. That's actually less than my personal expenses. My fixed allowances to my parents and wife plus my mortgage, telco, property taxes and conservancy fees is about $5,500.

b) He's trying hard to sell himself.

Just because he acknowledges the awkwardness of trying to sell himself on any job does not mean that he is not doing that. It's awkward for me too. As I'm gunning for internships right now, companies try to interview you remotely as it is logistically too much to interview so many law undergrads. I had my first attempt and was surprised by how difficult it is because you can't assess the interviewer's body language.

Amazingly I used to chair meetings on conference calls but never really felt much stress in the past. It's always awkward to sell something.

c) He did not save enough when times were good

One brickbat which I have to concede is that Mr Chua did not save enough when times were good. This is a teachable moment for all knowledge workers in their 30s who think that everything is fine. Had he saved an income portfolio, at his age, it would easily be equal to his wife's income and his family would still do fairly well on $12,000 a month.

If you examine this case carefully, I might even guess that Mr Chua did save by pre-paying his mortgage as, otherwise, it would be difficult to even save that $1,000 every month in his current situation.

If someone is stuck in their 40s and suddenly jobless, the number of things which can be done can be quite limited. I have some suggestions but perhaps some readers can provide more solutions :

a) Avoid trying to invest your money in such times.

Markets have a tendency to betray you when you need them the most. The worse thing an unemployed PMET could do is to play with forex instruments. The best way to invest in dividend stocks was to do so a few years ago to build it up before you become unemployed.

Rushing into investing thinking that its a panacea is a bad idea. Using your home as collateral to get a loan to invest is an even worse solution than unemployment.

b) Go for a low-barrier to entry job

The most obvious option is to become an Uber Driver. I'm waiting to have some folks tell me that they can really make $5,000 a month.

Other people will become insurance and real estate agents but bad economic conditions would also make these options untenable.

c) Look for a franchise business.

I guess the best way out is to use some of your savings to get into a franchise business. FLA conducts an exhibition every year which I have been going for quite a while but haven't got the guts to risk my own capital so far. Just make sure you avoid the MLM scams out there.

A franchise is a tested business concept but profit margins are razor thin. The risk is your capital and there is definitely a probability of business failure although it is very low compared to starting your own business. Some folks are turned off by the idea of paying someone to give you a job but, heck, you are a PMET in your 40s and should be mature enough to do what works.

I think the downside is that hiring and maintaining a workforce is a nightmare so you might want a partner to split the work so that you can have some work-life balance. It always amazes me that unemployed 40-something PMETs are the last to hire their own kind once they have a business running.

For the folks of my generation, it might be useful to ask yourself how different are you from Mr Chua. For me, the difference is very slight. Mr Chua was retrenched when his company decided to shut down his plant. I was unemployed for two years because I tried to retrench myself in the fear that one day, some company would do me in anyway.

This year, there will be plenty of sob stories in the news of mid-life PMETs losing their jobs.

Better start saving while is going is good in your 30s and keep your family expenses lean.

Beware of False dichotomies when investing.

I don't have much to say this week as I spent half my weekend stuck in traffic heading towards my brother-in-law's wedding on Saturday. The other half was spent catching up on readings after missing a lecture on Saturday this week.  I did squeeze in some retail therapy just now picking up some books on Kindle and a new armoured Batman action figure.My daughter asks me why I still buy toys for myself but not her uncles on her mother's side. I tell her that I'm still a kid like her.

I don't have a very heavy article today. Instead I will build on something by BigFatPurse on lifestyles of some of the top financial gurus in Cyberspace.

In this article BFP compares the different approaches between two gurus and asks the reader to choose which one they prefer. Mr.Mustache seems to be more popular among financial bloggers because of his down-to-earth background and focus on frugality. Ramit probably has more mass market appeal as he not particularly big on frugality and wants his followers to go for big wins.

I want to appeal to readers that personal finance is both an art and a science. Some elements of investing can be very precise and run off complicated analytics but often you need to draw upon your  knowledge of world economy and political science when making buy and sell decisions, as such it's not profitable to see the world as a binary between two finance gurus.

When you analyse Mr. Mustache, frugality is really the art and science of keeping your expenses low. It's only half of the equation of getting money to invest into markets to generate your dividends. The other half provided by Ramit is about expanding your revenue and top-line.

Both ideas are fundamental to producing savings to be pumped into the markets. The other local finance gurus like Kyith of Investment Moats and AK71 are crucial reads as they provide some direction as to how to maximise your investment returns.

Recently, I've been contemplating a new book as I am working with WDA  ( very tentative right now ) to give a talk on financing a child's university education in July and I have to update the model I proposed in Sowing the Seeds of Prosperity.

My older model revolves  Earning, Saving, Investing, Protecting and Gifting your capital.

This older model may need some overhauling in that Learning has become serious enough to warrant a write-up on its own. IT innovations have started destroying the careers of knowledge workers and the literature is turning towards lifelong learning but right now there is no rigorous science behind picking up skills to survive a future where an algorithm can be written to defeat the greatest Go Champions of the world.

( It utterly fascinates me how software in the US is destroying legal careers. But that is another posting after I am done with the literature reviews. )

Some piece of management literature focus on empathy as the next big thing but books promoting right-brained creativity, emotional intelligence and design thinking  have been written for the past decade and we are not seeing a lot of gains in salaries for people who focus primarily on soft skills ( Are English majors expecting a raise anytime soon ? ). Instead, most gains are made by world-class technocrats who take the time to develop some soft skills to make themselves more accessible to normal people.

With Learning as a cornerstone of my personal finance framework, I have to provide space for the best teachers ( the likes of Scott young and Cal Newport )  to be put on the same pedestal as the best investing gurus.

This means finding space for contradictory ideas to exist by creating an accommodating framework in future writings.

Saizen's Defence - Results from my arbitrage attempt.

Chess and wargames have a lot in common in investing. Wargamers are familiar with ancient tactics such as Scipio's Defense. Opening chess moves are loosely classified into gambits and defences.

I attempted a nifty defense maneuver using the Saizen REITs in the face of poor market conditions a few months ago. For the technical details, you can refer to Bully the Bear's article on what he did for Saizen stock.

The strategy is to put money in a safe place with a guaranteed exit time and then exploit the market for more opportunities later. This is a good for folks with a cash reserve and want to fight off inflation.

The generalised strategy is as follows :

a) There has to be bearish market with great uncertainty over the next 6 months.
b) One stock is being taken private at a fixed date with a projected price.
c) The exit should be around 3-6 months away.
d) The gap between the current price and exit price will give you at least 5% profit.

If your cash hoard can be invested in this counter, you are in essence getting a fixed deposit yielding an annualized 10% yield with a 3-6 month tenure. Some popular finance books actually recommend leverage when you make bets like this and you can engineer a 20%-30% yielding position if you like playing with fire , but I do not recommend it because sometimes such purchase attempts fails and you can be hit with 10%-15% losses.

So I was able to put about $50,000 of family funds to lock-in this interest rate for my dad, most Saizen investors expect to have a major exit at the end of this month, with the remaining proceeds coming in before year end.

So far, I think results are mixed and we cannot conclude that it is a superior investment technique because the money has not been fully returned yet.

Just before CNY when things looked particularly bad, I created a tiny position of stocks and REITs which was centred around Mapletree Greater China Trust, I thought it was a good time because it was beaten down quite badly and my wife's portfolio can benefit from a portfolio which gave more than 8% and provided more diversification for her account.

Right now this other MCGGT portfolio is winning.

The problem with the Saizen defence is that in a bearish climate, Saizen itself never drops low enough to become a bargain while other stocks in the market became very cheap as the markets got worse.

After buying Saizen and locking down $50k, I was unable to exploit MCGGT later which was beaten down by bad news coming from China. MCGGT has already rebounded quite aggressively and I'm not sure if the returned proceeds from Saizen should be farmed into MCGGT,

But I'm quite there will be plenty of stocks being taken private this year. If you are precise with your calculations and can diversity across such opportunities, you can make a decent profit running an arbitrage desk from the comfort of your own home.








 

Why engineers and technology professionals become road-kill at middle age.

I thought I'd write another article which is a follow-up to my previous post advising the folks who might be considering an engineering career.

In this post, I want to explain the reasons why engineers and tech professionals wind up becoming road-kill at middle age. Why is the old engineer is always the bitter one who laments about how much higher their less academically brilliant sales counterpart is earning twice their incomes when they are still grinding in data centres.

As it was recently said on social media :

Retired bankers play golf, retired engineers drive taxi.

First of all, I did work with some engineering managers in their 50s. A lot of them are stuck in their old ways having worked in major MNCs for decades and then finding out that they are retrenched when the company decides that their services are no longer required. These are pleasant people but they are stuck in the old world of mainframes when the IT department is rapidly moving into the cloud. Being retrenched workers, they are also unable to tap into their deep networks in their old companies. One case I worked with have a tendency to keep repeating themselves using old cliches and I think this turned off their younger subordinates who consider themselves better than they are.

Over in school, I was also able to experience working with people in their 20s and 30s as peers and I can empathise why some of us folks in our 40s are disliked as team workers in Law School. We can be overly directive and some of us like to  repeat ourselves over and over again. A few of us are just not as good as the younger guys, our analysis can be sub-par and lacking in substance. It's something I feel bad about because law firm HR departments are going to mark us down for the actions and tendencies of some of us.

So my experience allows me to take a stab at answering the question as to why engineers end up being road-kill at middle age but not other professions.

The key insight is this :

Our schools choose engineers based on their proficiency of physics and math subjects - subjects which require constant grinding and solving new problems using 10 year series assessments. This ensures that only the most conscientious students wind up joining engineering school. Because of the rigorous content of a technical subject, there is also a bias towards introverts when assessing academic excellence.

More importantly are the kinds of students engineering faculties fail to attract - Openness to new experiences is crucial to technological work because it affects how much a professional is able to learn new programming languages and find innovative ways to solve technical problems.

So here are the results - local universities produce introverted, conscientious professionals  and average or below-average openness.

This is fine for the first 15 years of an engineer's life. But due to changes in the human brain of a person in their 40s.  The engineer becomes less open to new ideas and lose the ability to learn new things. Furthermore, while introverts are still very smart at middle age, they would not have built the weak networks to sustain future careers as the extroverts would have done.

The older tech professional starts become set in his ways - And you always know such an engineer if you work in a real IT environment, the guy who makes $8,000 a month looking after the AS/400 who talked about how robust and reliable the iSeries IBM servers were even they are being displaced by Linux machines. Some even claim that the cloud is marketing jargon and just a new way to market server racks in a data centre.

How can you retool this guy into Data Scientist ? How can he even learn AngularJS or NodeJS ? Graph databases ? SDKs are now being released and deprecated at a ridiculous rate.

In the past, operational IT folks fight aging by becoming process folks covering ITSM to remain relevant only to be displaced by wider changes in the ITSM software and new frameworks like DevOps.

The case within the legal and accounting profession is different. Changes in the legal world are rarely earth-shaking, any abrupt confirmation in case law has been hinted at by the House of Lords a decade ago. Ditto for accounting, because one can only imagine what earth-shaking consequences there would be if we overhaul GAAP. This is why even though accountants take on the same kind of students as the engineering faculty, you don't see so many bean counters driving taxis in their 40s.

As it stands, engineering schools are quite far behind the tech industry. This latest article by Tech In Asia hints at how far behind engineers of my generation who are currently teaching in local polytechnics are ensuring that a fresh polytechnic student graduates with obsolete skills.

The government is already doing the right thing to absorb graduate engineers. It generates baseline job guarantees and the narrow minded ones can always do government procurement at middle age. The government needs to realise that $500 in a learning account is not enough for tech professions.

The solution to this is not to just look into a student's extra curricular's record when selecting candidates for engineering programs. The system has to ensure that openness to new experiences is a criteria when hiring an engineering lecturer. I will not trust an engineering lecturer who is precise and dogmatic in his ideas, I would rather pick one who has some geeky interests like RPGs, music, cosplay, or arcade game programming because it subtly hints that he has multiple and varied interests.

At a personal level, some of my other articles already provide the general advise for engineers reaching middle-age.

Start saving, investing and networking with other because, beyond 45, it may be too late.




     

Lessen the psychological impact of a home mortgage though asset/liability matching.

I just ended hell week. Two paper submissions this week and a team presentation has made me lose sleep over the last few days. My body still aches after having a nap and I wonder if I am actually falling sick.

Today I will talk about home mortgages and psychological strain I have been receiving from my home loan for the past two years. The current state is that I pay my home mortgage with my CPF-OA and I have enough to do this for another 4 years at the current SIBOR rate. But this is psychologically straining because I worry that at the end of the year, I am unable to save enough of my dividends to offset the drop in my CPF-OA (given that its been a year of medical emergencies for my family). The other problem is that having a REIT and high-yielding portfolio, I also experienced the double whammy of increasing mortgage rates and a decreasing income in a bad year like 2015.

( Banks probably won't let me refinance as I have no income right now. )

This could mean that my retirement is not as sustainable as I thought it would be. And my loan has over 30 years more to go !

So I thought I'd return to the roots of this blog by toying around with the idea of matching an investment asset like a different kind of equity portfolio with a liability like a home mortgage that goes beyond simply farming dividends back to pay off a mortgage loan like I am doing now. The idea of asset/liability matching is to set aside or create a satellite portfolio which can offset the psychological impact of my home mortgage.

In effect, you are buying a peace of mind when you create this portfolio.

Currently, my home mortgage is about $530,000. After paying off my mortgage regularly without earning an income for the past 2 years, I barely have about $105,000 in my CPF-OA. Most of my money is locked down in my SA account anyway but I suppose between myself and my wife, we can pony up $150,000 to immediately reduce the loan to $380,000 if I do not touch my other assets.

One answer would be to simply buy $380,000 of Singapore Savings Bonds because it currently yields a rate which is higher than my floating rate loan. But that would be problematic because floating rates can increase faster than SSB yields and I would prefer to set aside a sum which is significantly less than $380,000.

So what I have to do is to hunt for investment assets with two attributes :

a) Investment must generally increase in value when interest rates rise.

The biggest problem with Singapore is the lack of floating rate bonds. But reading a brokerage report a while ago, I know that Sheng Siong's net profit increases when interest rates increase. The other obvious choice are local banks like UOB which profit from mortgage loans.

b) Dividend yields must be higher than my floating rate. 

Both Sheng Siong and UOB yield more than my current floating rate loan which is around 2.2%, so this allows me that peace of mind without needing to accumulate $380,000 with my new rookie income.

So suppose I blend a simple portfolio which yields 4.5% using UOB and Sheng Siong, I would only need a portfolio size of only to $186,000 to match dividends with interest rate payments of my mortgage.

This satellite portfolio will need to be rebalanced annually to maintain my psychological well-being.

Suppose, I start with a mortgage loan of $380,000 at 2.2% and a satellite portfolio of $186,000. After a year of work, I reduce the loan to $360,000 at a rate of , say,  2.4% and the satellite portfolio increases in value to to $190,000 and yields 4.8%. The satellite portfolio required to yield the same interest as the mortgage loan is now $180,000. I can release $10,000 back into my REITs portfolio for more income while maintaining a greater piece of mind.

For now, I can only start this project when I return to the workforce but my biggest issue is to find stocks which do increase in value when interest rates go up. Articles are very vague when they describe stocks which have this property. The ideal scenario is to find 6-8 stocks with this property.

If you are a reader and can offer some suggestions, do comment on this blog.

This may be potentially a better idea than simply paying-off a SIBOR floating rate home loan prematurely which did cross my mind last year.




   

Personal Update - Meaningless Holiday just ended meaninglessly.

Ok, time for another personal update.

a) Law School

I am so demotivated right now, I should actually be vetting my research papers instead of updating this blog.

Right now, I am going through the process of hunting for internships and Training Contracts and made quite a number of number of applications, some rejections have already starting trickling in and I am still shocked at how competitive this game has become ! I am praying for an interview in March.

Rejections as a rule leave a bad taste in my mouth because, to be fair, it seldom happens to me up to this stage in my life. I guess an important part of personal growth is to have the door slam shut in your face. Perhaps 40-something year-olds may look forward to more rejections in the future in Singapore.

To add insult to injury, I just ended a one week break which really isn't really a break at all. I initially rushed through two research papers so that I could consolidate my studies during the holidays but the consolidation took up such a large part of the break, it ended up becoming more intense than a regular study week with classes. Making matters worse, by the time I finished catching up with my work, my group assignment got released.

So for my entire holidays, I caught up with friends for just a few hours and had two fairly rushed RPG sessions.

My only consolidation is  that I did manage to celebrate Durandal's one month with my family.

b) Personal Finance

Is it just me or is the markets doing rather well lately ?

This past month defensive investors are really outperforming the rest of the markets with REITs and business trusts declaring fairly decent dividends. As most of my expenses on my son have been made, I was able to invest some amount I set aside for contingencies back into the markets. There is room for cautious optimism as the Fed would prefer to review their policy of raising interest rates. Where rates dip into the negative, I can expect SIBOR to ease up a a bit to give me more leeway to pump my dividends into the markets instead of pumping it into my CPF-OA to pay for my mortgages. Once floating rates exceeds fixed rates, it means local banks anticipate an easing in the medium term.

My challenge this year is to have net savings from my dividends, I really hope that I can shore up some REIT purchases as they are quite cheap right now.

c) Medical expenses and emergencies.

The year of the monkey continues to ravage this hapless Tiger.

The other event are medical expenses incurred by my mum for her treatment. In one instance, the financial advice from the hospital for a mastectomy was about $200 and I ended up paying paying over $2,200. In another instance, I was advised to set aside up to $7,000 for radiotherapy but the whole bill ended up only about $1,200. Clearly, there is something inherently meaningless when local government hospitals provide financial advise to hapless sick people in Singapore but I shall leave it to other members of the public to lodge a complaint. The first case is devastating to poorer individuals who do not have contingency funds, the second case damages investors who who will prepare the money in cash from their investment portfolio.

d) Readings 

I like books with anything to do with McKinsey Consulting. I read the Pyramid Principle by Barbara Minto over a decade ago and the Mckinsey Way when I was published because the anything Mckinsey is idiot simple to read and chock full of practical advice. If McKinsey wrote a book on Poems, Sexual Positions or Baking Cakes, I would buy it for the sake of curiosity.

The McKinsey Edge by Shu Hattori is chock full of tips for knowledge workers from how to structure a set of power-point slides to asking clients intelligent questions. It is a great read.

Right now, I am in the middle of this book called Simple Rules by Donald Sull. When I am done, I might have the tools to distill an entire investment philosophy into a series of simple rules of thumb. More on that later.

Sadly, I was unable to read any fiction this holiday. If I had a chance it would be Three-Body Problem by Cixin Liu.

e) Visited Singapore's Silicon Valley.

Took half a day off to visit Block 79 and the government's efforts to promote start-ups seems to be ramping up to a whole new level. I spoke to a founder and met some ex-colleagues.

I am still digesting some of the news I received during my visit .On one hand the government seems to going all in into the start-up space with tax-payer money. On the other, I got news that a really prominent accelerator is no longer in that business.

On balance, I don't buy the idea of having a Singapore start-up although I would seriously consider starting one in my lifetime. Singapore needs to have the Google and Facebooks set up shop for me to change my mind.

But the free coffee at Blk 79 is good.